Lee Pharma argued that 99% of India’s demand for a diabetes drug went unmet, that the price exceeded a poor household’s daily income, and that the patentee never manufactured in India. The Controller rejected every ground — and in doing so set out just how much evidence a compulsory licence applicant must actually produce.
Why compulsory licensing exists
Patents encourage invention and protect the inventor. But the Patents Act also strikes a balance — making patented products available to the public at large. Compulsory licensing (CL) is the mechanism: it allows someone other than the patentee to make the patented product or use the process without the patent holder’s consent. The route is deliberately demanding, and the applicant must satisfy the conditions in Section 84(1).
The facts
Saxagliptin is prescribed for Type II Diabetes Mellitus. The patent was granted to Bristol-Myers Squibb and later assigned to AstraZeneca AB. After the statutory three years from grant had passed, Lee Pharma Ltd. — a Hyderabad pharmaceutical company — applied in June 2015 under Section 84(1) to manufacture and sell the compound.
The application initially failed because no prima facie case was made out. It was heard afresh after a new Controller General took office, with Lee Pharma given a hearing under Rule 97(1) of the Patents Rules, 2003. The Controller again refused the licence.
The three grounds under Section 84(1)
Any person interested may apply on one of three grounds — that:
- the reasonable requirements of the public with respect to the patented invention have not been satisfied;
- the patented invention is not available at a reasonably affordable price; or
- the patented invention is not worked in the territory of India.
What Lee Pharma argued
Lee Pharma established it had been in R&D, production, distribution, marketing, exports and imports of pharmaceutical products for 17 years — qualifying it as a person interested — and that it had made reasonable efforts to negotiate a voluntary licence, which the patentee did not conclude.
- Public requirement: roughly 60.1 million people in India suffer from Type II DM. If even one million were prescribed Saxagliptin, annual demand would be 365,000,000 tablets; imports for the year were only 823,855 tablets — about 0.23%. Hence a claimed 99% shortage.
- Affordability: around 30% of India’s population lives below the poverty line, earning less than ₹32 (rural) / ₹47 (urban) per day, while a single tablet cost roughly ₹29–41 — more than a whole day’s earnings.
- Local working: the patentee had not manufactured Saxagliptin in India even after eight years.
Why the Controller refused
The Controller accepted Lee Pharma was a person interested under Section 2(1)(t) and had made reasonable efforts to negotiate — but held none of the three grounds was made out.
- On public requirement: not everyone with Type II DM relies on prescribed medicines; many manage through lifestyle, diet or exercise. With no reliable data on how many patients were actually unable to obtain the drug because of non-availability, ground (a) failed.
- On price: the burden was on the applicant to show the patentee’s pricing was unreasonable. Comparable drugs for the same condition — Linagliptin, Sitagliptin, Vildagliptin — sold in the same ₹42–58 range. Lee Pharma would have had to prove the entire class was unreasonably priced, which it did not. Ground (b) failed.
- On local working: to manufacture a drug in India there must be demand for it in the Indian market, and the applicant failed to establish that demand. Ground (c) failed.
Where this sits in India’s CL history
This was only the third compulsory licence application in India — the first being Natco Pharma for Bayer’s cancer drug Sorafenib (Nexavar), the second BDR Pharma for Bristol-Myers Squibb’s Dasatinib (Sprycel). The first was granted; the second and third were refused. The Natco/Bayer licence remains the only compulsory licence ever granted in India — a decade on, the route has stayed largely theoretical, and the Saxagliptin decision is a large part of the reason why.
The Controller’s reasoning tracked the Bayer framework closely while making the evidentiary burden explicit: assertions about population-level need, comparative pricing and non-manufacture are not enough. An applicant must bring data — on patients actually denied access, on why the price is unreasonable relative to alternatives, and on real market demand.
The takeaways
- Section 84(1) has three grounds — public requirement, affordable price, and working in India.
- The burden sits squarely on the applicant — and it is an evidentiary burden, not a rhetorical one.
- Comparative pricing defeats affordability claims — if rivals price similarly, you must attack the whole class.
- Only one CL has ever been granted in India — Natco/Bayer; the route remains exceptional.
Frequently asked questions
When can a compulsory licence be applied for in India? After three years from the date of grant of the patent, by any person interested, on one of the three grounds in Section 84(1).
Why did Lee Pharma’s application fail? The Controller held it had not proved unmet public requirement, unreasonable pricing (comparable drugs cost the same), or lack of demand justifying local manufacture.
How many compulsory licences have been granted in India? One — Natco Pharma over Bayer’s Sorafenib. The BDR Pharma and Lee Pharma applications were both refused.
Does a patentee’s failure to manufacture in India automatically justify a CL? No — the applicant must still show there is actual demand in the Indian market for the patented product.